When buying lottery makes sense,

[ninaprincess]

The current Mega pot is $500 mil, lump sum is $359 mil and after taxes it is about $233 mil.

The odds of hitting the jackpot is 1/176 mil

Doesn’t this make buying lottery profitable as we haven’t even consider the smaller prizes?

[sdrealtor]

Really?

[(former)FormerSanDiegan]

Statistically, the expected return on a $1.00 lottery ticket with a jackpot of 233 Mil and odds of 176 mil:1 is $1.33 (assuming only 1 winning ticket).

Yes. One could aregue that this is one of those rare occasions where, statistically, the expected return (before taxes) is higher than the ticket price for the lottery.

But, then there are the taxes. Also, I ignored the probability of multiple winners.

[ninaprincess]

I already subtracted 35% for taxes. So it is a good investment.

[quote=FormerSanDiegan]
But, then there are the taxes. Also, I ignored the probability of multiple winners.[/quote]

[sdduuuude]

Considering multiple winners of the same prize is important. When the prize gets bigger, more people play. If the number of people playing doubles, it effectively cuts your expected winnings in half.

Even using the 1/176,000,000 figure, you have to include the probability of sharing the prize in your expected value calculation or it’s a bad calculation.

If your expected value was positive, those running it wouldn’t be able to make any money, now would they ?

[sdduuuude]

And if you think the number of players doesn’t increase, consider your own (incorrect) method of determining if it is worth playing and realize that lots of people do the same calculation and decide to play, even if they usually do not.

[sdrealtor]

My brother in law always used to say you cant win if you dont play. I always told him you couldnt lose either.

[scaredyclassic]

Game for suckers

[ninaprincess]

I think you guys don’t understand the point here.

Of course, I understand that lottery only pays out 50% to prizes so by playing you automatically lose 50 cents on the dollar ON AVERAGE. But, there is a difference between the return of a $12 mil jackpot and a $500 mil jackpot.

Yes, it is possible to have multiple winners. But I also mentioned that we have not account for the smaller prizes and I believe that it is more than offset the multiple winners scenario. Since the odds is so low, there haven’t been that many multiple winners with Mega Millions.

I am terrible with statistics and do not have the skills to compute the exact return but my gut feeling here is that currently there is positive return.

[Anonymous]

[quote=sdduuuude]If your expected value was positive, those running it wouldn’t be able to make any money, now would they ?[/quote]

I don’t know the specifics of the CA lottery, but I do know that the payouts are cumulative in many lotteries, so the expected values do change.

There may be situations where in a single play, the player has a positive expected value, but overall the expected value is negative (favors the “house.”) But it is true that it would be impossible to predict the expected value precisely, since it is a function of the number of players.

A while back there was a group of quant traders who would monitor the various lotteries around the world and make large bets on certain days, often traveling to other countries, when the expected return was positive. Some lotteries changed their rules because of these activities.

(I’m including the cost in the expected value, as it seems you are, meaning a “positive” value is a “winning” outcome.)

Remember that the “expected” value is not the one that will happen for sure, and positive expected value doesn’t mean guaranteed win. In fact one could have a random function where it is impossible for the “expected” value to occur at all in a single trial.

But, in general, the lottery is a tax on the stupid.

[moneymaker]

“ninaprincess” I believe you are right! Now I myself will not buy more than $40 in tickets because I think it is a pain to go through them looking for winners. The argument about multiple winners, I believe is irrelevant. The odds are the odds. Doesn’t matter how many people play because the more people play the higher the jackpot,right up until the last ticket is sold. During the last round approx. $188 million tickets were sold yet no one won. I’m going to buy 20 quick picks and 20 self picked tickets and will report the results Saturday morning. “Good Luck to all that are going to be playing” and as in the Hunger Games “may the odds be in your favor”.

P.S.- This is the first time in my memory that it really is not a bad idea to play the lottery.

[8bitnintendo]

[quote=moneymaker]I’m going to buy 20 quick picks and 20 self picked tickets and will report the results Saturday morning.[/quote]
Statistically speaking, unless your self-picked tickets are deliberately targeted towards unpopular numbers, you’d be better off going with mostly or exclusively quick picks due to the decreased likelihood of having to share the prize. If all numbers are equally likely to be drawn, numbers selected by fewer people have a higher expected value.

People tend to choose numbers below 30-31 (for birthdays), 7, 11, multiples of 7 and 11, numbers in the middle columns of the selection form, etc.

If your self picked tickets are more about the hedonic value of knowing your “lucky” numbers are part of your ticket pool, obviously this may not apply…

[sdduuuude]

[quote=pri_dk]A while back there was a group of quant traders who would monitor the various lotteries around the world and make large bets on certain days, often traveling to other countries, when the expected return was positive.[/quote]

That’s awesome.

[(former)FormerSanDiegan]

[quote=sdduuuude]Considering multiple winners of the same prize is important. When the prize gets bigger, more people play. If the number of people playing doubles, it effectively cuts your expected winnings in half.

Even using the 1/176,000,000 figure, you have to include the probability of sharing the prize in your expected value calculation or it’s a bad calculation.

If your expected value was positive, those running it wouldn’t be able to make any money, now would they ?[/quote]

The expected value over time is not positive. It is considerably less than 1 (something like .4 or .5 since half the income from lotteries are paid out in prizes_). However, the expected value for any given drawing, may occasionally be positive on rare occasions.

[Hobie]

C-mon. Where else can you pay a buck and buy several days of dreaming? Cheaper than drinking 😉

True that it plays on the folks who probably really need that money. No offense intended Nina, just a sweeping generalization.

[UCGal]

[quote=Hobie]C-mon. Where else can you pay a buck and buy several days of dreaming? Cheaper than drinking 😉
[/quote]

Also some math… Buying 1 ticket improves your odds infinitly. From zero to great than zero.
Buying the 2nd ticket is a suckers bet… but that first ticket gets you in the game.

[The-Shoveler]

[quote=UCGal][quote=Hobie]C-mon. Where else can you pay a buck and buy several days of dreaming? Cheaper than drinking 😉
[/quote]

Also some math… Buying 1 ticket improves your odds infinitly. From zero to great than zero.
Buying the 2nd ticket is a suckers bet… but that first ticket gets you in the game.[/quote]

+1

Several days of dreaming of massages and umbrella drinks on tropical beaches.
Definitely worth a dollar.

[sdduuuude]

[quote=UCGal][quote=Hobie]C-mon. Where else can you pay a buck and buy several days of dreaming? Cheaper than drinking 😉
[/quote]

Also some math… Buying 1 ticket improves your odds infinitly. From zero to great than zero.
Buying the 2nd ticket is a suckers bet… but that first ticket gets you in the game.[/quote]

Wow. My probability professor just rolled over in his grave and he isn’t even dead yet.

[poorgradstudent]

My mother-in-law has a better job these days, but at her previous job when she had a bad day she would go to the 7-11 and buy a lotto ticket. Just imagining what life would be like if she won and could quit her job made her feel better and gave her peace of mind.

I’d call that $1 well spent. Heck, I routinely spend $2 to get a similar sense of happiness from a sugar soda!

[svelte]

[quote=poorgradstudent]My mother-in-law has a better job these days, but at her previous job when she had a bad day she would go to the 7-11 and buy a lotto ticket. Just imagining what life would be like if she won and could quit her job made her feel better and gave her peace of mind.

I’d call that $1 well spent. Heck, I routinely spend $2 to get a similar sense of happiness from a sugar soda![/quote]

lol – that’s not a bad way to look at it.

As long as she’s not spending $100 per paycheck.

I’ve probably bought 10 tickets over the past 10 years. My problem is I get equal parts warm fuzzies from imagining winning and repulsive guilt from throwing away money (this part comes in after checking the winning numbers 🙂 ).

[Diego Mamani]

Walterwhite and sdrealtor have it right. Lotteries are essentially a tax for math-impaired sheeple.

[scaredyclassic]

dammit. my kid heard about the lottery on the internet and now wants a ticket. i’ll get one but i told him the money w as just going to screw up our life.

[scaredyclassic]

we’ll have little drive or purpose, work will seem futile, we’ll become paranoid about people being after our money, we’ll need security, we’ll have to hide out, on the other hand, we can play a lot of chess. And devote pretty much all of our time to intensive strength training.

however, if the money really necessary? i just bought the “chesster” kids software and a really nice wood chess set (discounted) from http://www.houseofstaunton.com all for under $100.00….; doubt 500 million would get us a much nicer set or add very much to our happiness.

[The-Shoveler]

WW
I think that attitude will definitely increase your odds
There are cosmic forces at work always trying to trip us up (Well at least in my experiences).
We will know if you comeback on Monday talking about all the little people in your life and how much you appreciate them.

[Anonymous]

If you view money as a means to get “stuff” you will never have enough.

If view money as freedom, then you may someday have enough. In fact, you probably already do.

[sdrealtor]

So my 85 yr old mother left me a message to go buy her $10 worth of lottery tickets. She has never played the lottery in her life but she had a feeling. I left her a message back saying “If I dont call you Saturday morning assume I won the money and you wont hear from me again. ON the otherhand, If you see my number on caller ID Saturday morning assume I am looking for my $10 back”.

[svelte]

[quote=sdrealtor]So my 85 yr old mother left me a message to go buy her $10 worth of lottery tickets. She has never played the lottery in her life but she had a feeling. I left her a message back saying “If I dont call you Saturday morning assume I won the money and you wont hear from me again. ON the otherhand, If you see my number on caller ID Saturday morning assume I am looking for my $10 back”.[/quote]

lol!

[sdduuuude]

Q: Why doesn’t a wealthy person buy every number for $175 million and ensure themselves a $500 million return ?

A: Because if two others get the same idea, then would have three people paying $170 million but they would only win 500/3 = 166.67 million each.

Guaranteed to lose money.

Just an example of how multiple winners changes the odds, and judging by the crazy people in my office and sdr’s mom, there’s gonna be a few more hands in the pot.

[scaredyclassic]

Man I hope I don’t win.

Sdrealtors admission here will be bad for him during grammas lawsuit.

Always remember never admit anything.

[sdrealtor]

My mother called back laughing. She loved my message. This is coming from a women who in her 80’s saw a course at Mira Costa College about how to save money and live frugally. She called up the professor and asked for tutition discount. He asked her if she wanted to be a guest lecturer.

[moneymaker]

It will definitely get crazy if nobody wins this time! With around 188M tickets purchased last time I’m sure it will be more this time.

[scaredyclassic]

Even with a half billion it would still make sense to keep my low interest mortgage. I think. All the calculations get too weird if you’re supereich. That’s a problem.

[carlsbadworker]

[quote=moneymaker]It will definitely get crazy if nobody wins this time! With around 188M tickets purchased last time I’m sure it will be more this time.[/quote]

I read that 400M tickets are already sold in the first 48 hours. My first impression is: damn, the American poor are rich!

[sdrealtor]

If I win the big prize I pledge to endow a scholarship in the study of Real Estate Bubble’s in the name of Professor Piggington!

And to throw one helluva party!

[scaredyclassic]

We lost but did discuss it for an hour over dinner before knowing we lost. I persuaded the kids our lives would probably be worse and definitely no better if we won. The younger two were very disturbed when I told them we would gave to move. But we like our house! Sorry kids, security requires a efferent set up.

Also distressed at bring takn out of their schools. So they were slightly relieved to lose

[moneymaker]

I won!
Well at least 1 of my tickets was a winner. Just as the odds predict I had 1 winning ticket out of 40.

[sdrealtor]

There were 29 winners in CA with 5 numbers but no Mega ball. They each won $250K.

I won $2. Time to call mom and get my $8 back

[zk]

[quote=carlsbadworker]My first impression is: damn, the American poor are rich![/quote]

If I won the lottery, none of my charity would be given to people in the U.S. With the possible exception of the mentally ill, who sometimes get screwed here.

The poor in America:
[img_assist|nid=16016|title=Dayum, I wish we could afford cable. |desc=|link=node|align=left|width=300|height=183]
The poor elsewhere:
[img_assist|nid=16018|title=…|desc=|link=node|align=left|width=184|height=275]

[no_such_reality]

Expected value isn’t useful when the probabilities are very small or the payoffs extreme.

As for the rich people not buying all the numbers, it’s not because they can do math, it’s because the cost and time of doing it is excessive.

And, the odds of multiple winners is calculable. It’s just additional statistics. Purchased tickets are porportional to jackpot size.

Buy for the fun of it. Like you buy a donut or Starbucks for the occasional enjoyment.

But the biggest question is after I win, will I have enough money to buy my own politician?

[carlsbadworker]

[quote=no_such_reality]Expected value isn’t useful when the probabilities are very small or the payoffs extreme.[/quote]

Yes, I don’t understand the frenzy about the $600M jackpot. Normal jackpot at $12M is enough for me. And the odds is the same for every drawing.

[Coronita]

You guys just suck… If you’re going to throw money into the trash, might as well do it for charity…

http://www.sdraffle.com/Overview.aspx

[no_such_reality]

[quote=flu]You guys just suck… If you’re going to throw money into the trash, might as well do it for charity…

http://www.sdraffle.com/Overview.aspx%5B/quote%5D

Um, our Schools are a charity case…

[Coronita]

[quote=no_such_reality][quote=flu]You guys just suck… If you’re going to throw money into the trash, might as well do it for charity…

http://www.sdraffle.com/Overview.aspx%5B/quote%5D

Um, our Schools are a charity case…[/quote]

You realize once that the lotto started “funding” schools, original dollars earmarked for education were just redirected elsewhere. the Lotto didn’t supplement the education funding in CA.

[no_such_reality]

[quote=flu][quote=no_such_reality][quote=flu]You guys just suck… If you’re going to throw money into the trash, might as well do it for charity…

http://www.sdraffle.com/Overview.aspx%5B/quote%5D

Um, our Schools are a charity case…[/quote]

You realize once that the lotto started “funding” schools, original dollars earmarked for education were just redirected elsewhere. the Lotto didn’t supplement the education funding in CA.[/quote]

Snark
Your head.

🙂

[moneymaker]

I checked it out a little more (boy was it tough to pick those last 20 sets of numbers,actually only 10, I delegated the other 10) and on CA lottery winnings there is no stae or local taxes and they “only” take 25% for Federal taxes. So better than I thought, of course better save 10% to pay the rest of the federal taxes later on.

[pencilneck]

“Statistically, the expected return on a $1.00 lottery ticket with a jackpot of 233 Mil and odds of 176 mil:1 is $1.33 (assuming only 1 winning ticket).”

Not a lottery expert, but large winnings are also paid out over what looks like 26 years.

$1 now for $1.33 returns over 26 years isn’t a great investment, imo.

If you elect for the lump sum payout, you get far less than the advertised jackpot.

(edit: yeah, yeah, I know I’m late to the party, but people seldom mention the part about the lottery effectively being the chance to receive a very low interest rate bond.)

[GH]

I have never understood why 640 MILLION dollar winners is not preferable to 3 200 million winners. A million dollars for most people is a life altering win. Mortgage and debt gone. College paid for etc.
That said folks would never go for this. Only the idea of a super win keeps folks buying and at astronimical odds akin to finding a grain of sand on a beach!

[Anonymous]

[quote=GH]I have never understood why 640 MILLION dollar winners is not preferable to 3 200 million winners. A million dollars for most people is a life altering win. Mortgage and debt gone. College paid for etc.
That said folks would never go for this. Only the idea of a super win keeps folks buying and at astronimical odds akin to finding a grain of sand on a beach![/quote]

I never understood why the government is in the extreme gambling business at all.

What is the point of occasionally and arbitrarily taking a few dollars from millions of people while giving hundreds of millions of dollars to a few people?

The lottery is an absurd way to raise revenue.

[sdduuuude]

[quote=pri_dk]I never understood why the government is in the extreme gambling business at all.

The lottery is an absurd way to raise revenue.[/quote]

It is an awesome way to raise money if you can pass laws prohibiting anyone else from providing a competing game under the guise of “gambling is immoral”

[no_such_reality]

I won and after factoring out anything with a probability on par with being struck by lightning, I got exactly my expected value of 10 cents on the dollar back.

[sdduuuude]

I won the lottery !

By that I mean – I didn’t buy any tickets and none of my friends who did buy tickets won a damn thing!

[Coronita]

[quote=sdduuuude]I won the lottery !

By that I mean – I didn’t buy any tickets and none of my friends who did buy tickets won a damn thing![/quote]

ditto.

[Author]

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